Two bets, no moat: Why Warren Buffett’s India play never took off

The Paytm move, however, felt different, larger, and better-timed. This was a chance to ride India’s booming digital economy, not just test the waters.

But by 2023, Berkshire had fully exited Paytm too. No fanfare. No compounding. Just another quiet exit from a market that continued to create value without one of the world’s greatest investors in the picture.

So, what went wrong?

Two India bets, two very different theses

Warren Buffett is famously cautious. He has often said:

Rule No. 1: Never lose money

Rule No. 2: Never forget rule No. 1

Not surprisingly, he prefers to invest in businesses with stable earnings, long-term pricing power, and management teams he trusts implicitly. For most of his career, that meant staying largely close to home, both geographically and operationally.

Yet, between 2011 and 2018, Berkshire Hathaway made two distinct attempts to tap into India’s growth story.

At first glance, these investments couldn’t have been more different. But at their core, both reflected Buffett’s attempt, albeit a limited one, to find a foothold in one of the world’s most promising economies.

The first attempt: A conservative entry into insurance (2011)

Buffett’s initial bet on India came in 2011, when Berkshire Hathaway entered into a corporate agency agreement with Bajaj Allianz General Insurance. The idea was straightforward: sell motor and health insurance products directly to Indian consumers through a digital platform, berkshireinsurance.com, leveraging the Berkshire brand and the growing push toward financial inclusion.

The logic, at least in theory, made sense. Buffett has long considered insurance one of his favourite business models. GEICO, Berkshire’s crown jewel in the US, exemplifies why: steady cash flows, recurring premium income, and float – premiums collected in advance and invested before claims are paid. In Buffett’s hands, insurance is not just a business, it’s a capital compounding engine.

India, meanwhile, had one of the lowest insurance penetration levels globally. In 2011, total insurance premiums as a percentage of GDP stood at just 2.7%, compared to over 11% in the US. With a young, underserved population and a rising middle class, the long-term opportunity looked undeniable.

But the structure of the deal diluted its strategic merit. Berkshire didn’t underwrite policies, didn’t participate in product design, and didn’t get access to the float that makes insurance such an attractive business for Buffett. It was, effectively, a digital distribution play. And one that arrived too early for its time.

In 2011, internet penetration in India was barely 10%. E-commerce was just beginning to take off, and financial services were still largely sold through agents and physical branches. Buying insurance online was not just uncommon as it was unintuitive for the average Indian consumer. Without a physical salesforce or distribution muscle, Berkshire’s platform struggled to gain traction.

By 2013, the venture was shut down.

It wasn’t a costly mistake as capital exposure was minimal. But it also didn’t leave behind any meaningful presence. The move was characteristically Buffett: cautious, tightly scoped, and quick to fold when the pieces didn’t fit.

In 2017, Buffett reflected on such environments and said that India’s regulatory and ownership limitations could be a serious impediment. In an interview with a TV news channel, he said that the country’s framework often prevents foreign investors from gaining the complete control they need, a point that, in hindsight, explained why the insurance experiment could not evolve into a compounder like GEICO.

The second attempt: A bolder bet on digital India (2018)

Seven years later, Buffett’s India strategy re-emerged. This time in a completely different avatar. In 2018, Berkshire Hathaway invested approximately $300 million in One97 Communications, the parent company of Paytm, at a reported valuation of $10-12 billion.

Paytm was everything the first investment wasn’t: large, high-growth, and bleeding cash. At the time, it had over 300 million registered users, led India’s digital payments space, and was aggressively expanding into financial services, insurance distribution, lending, and wealth management. It had recently launched Paytm Payments Bank and was aiming to become a full-stack financial platform.

This move came against the backdrop of India’s rapidly digitizing economy:

• Between 2015 and 2018, UPI transactions grew 700x in volume
• Smartphone penetration crossed 30%
• Digital wallet usage surged post-demonetisation in 2016
• India Stack and Aadhaar-based KYC dramatically lowered onboarding friction

But even at the time of investment, Paytm was loss-making.

Its payments business had thin or negative margins. Customer acquisition was heavily dependent on cashback offers and subsidies. And while it had breadth across services, it lacked depth in any single high-margin vertical.

Reports said Buffett himself wasn’t closely involved in this deal. The investment was led by Todd Combs, one of Berkshire’s portfolio managers, who works closely with Buffett.

In Paytm, Berkshire was more of a financial backer than a strategic partner. There was no board seat, no follow-on investment, and no clear engagement beyond the initial capital injection.

And when the company went public in November 2021, Berkshire did not participate in the IPO. The stock, listed at Rs 2,150, plummeted more than 60% within the first year. By 2023, Berkshire had made another quiet exit by selling its stake, booking a loss, and ending its second India chapter.

However, in a 2024 review of the market, Buffett expressed reservations about investing where regulatory unpredictability and the absence of full ownership remain persistent challenges. Although he acknowledged India’s enormous potential, he pointed out that markets built on incomplete control and fragmented governance were not conducive to the kind of long-term compounding he seeks.

This view ultimately shaped his decision to distance Berkshire from a venture that, despite its scale, did not offer the clarity of a mature, cash-generating business.

What didn’t work and why

Buffett’s greatest investment successes haven’t come from chasing growth or playing momentum; they’ve come from understanding how capital flows through a business, how management allocates that capital, and how time turns discipline into compounding. His failures, on the other hand, usually trace back to moments when these filters weren’t applied deeply enough.

That’s what happened in India – twice.

Paytm had scale but no profit engine

Berkshire’s 2018 investment in Paytm came at the peak of India’s fintech enthusiasm. Paytm had over 300 million users, dominated digital wallets, and was rapidly expanding into lending, insurance, and wealth tech. It looked like a gateway to the next 500 million Indian consumers.

But underneath the scale was a fragile economic engine.

Paytm’s payments business was a loss leader. The platform relied heavily on cashbacks to acquire users and merchants, particularly in the aftermath of demonetisation. More importantly, UPI which became the backbone of digital transactions in India had zero MDR (merchant discount rate), meaning no direct monetisation opportunity for intermediaries like Paytm. The more UPI grew, the harder it became to make money.

Buffett prefers simplicity in business models: clean margins, durable demand, and defensible pricing power. Paytm offered none of that. Its profitability relied on future success in credit and insurance distribution, two sectors that require regulatory clarity, underwriting discipline, and capital patience. In 2018, none of those building blocks were ready.

In effect, Berkshire bet on potential, not performance, something Buffett rarely does.

The insurance play missed the heart of the business

If Paytm was an aggressive play on the future, Berkshire’s first India investment was the opposite, conservative to a fault.

In 2011, Berkshire partnered with Bajaj Allianz General Insurance to launch a digital platform that sold insurance policies online. At first glance, this aligned neatly with Buffett’s core strength. He has built much of Berkshire’s cash-generating ability through insurance, using the float from collected premiums to fund long-term investments. Insurance is Buffett’s compounding machine.

But in India, the model didn’t match the strategy. Berkshire wasn’t underwriting policies or owning a piece of the insurer. It was simply acting as a corporate agent, earning commissions for selling someone else’s products. There was no float, no pricing power, and no control.

On top of that, the timing was poor. In 2011, internet penetration in India was just around 10 percent. Insurance, a trust-intensive product, was still largely sold through agents and in-person conversations. The idea may have been modern but the infrastructure and consumer behaviour hadn’t caught up.

Within two years, the venture was wound down.

Buffett’s process requires proximity and Berkshire never built it in India

The deeper issue behind both India bets wasn’t just the sectors or the business models. It was the lack of structure and proximity, two things Berkshire has always relied on in unfamiliar markets.

In Japan, for instance, Berkshire made sizable investments in trading houses only after building relationships, understanding the culture of conglomerate capital allocation, and identifying governance consistency. In the US, Buffett’s edge is compounded by the fact that he has studied US companies for decades, which gives him an unparalleled edge. He has a framework ready for any opportunity that may come his way. That’s why his decision-making is sharp and quick, no matter how big the monies involved.

In India, however, Buffett and Berkshire never had any local intelligence backed by decades of study. It didn’t create a research hub, hire sector specialists, or even engage actively in the public equity markets where many Buffett-style companies were thriving. Without proximity to management, regulators, and consumer behaviour there was no real way to build conviction.

So when both bets began to wobble one due to structural limitations, the other due to strategic overreach Berkshire had no operating leverage to course-correct.

India rewarded Buffett’s principles, just not in the companies he chose

Perhaps the most ironic part of this story is that India, between 2010 and 2023, created the exact kind of businesses Buffett typically adores, but none of them were on Berkshire’s radar.

Companies like Asian Paints, HDFC Bank, Nestlé India, and Pidilite generated 18-25% CAGR for more than a decade, with consistently high returns on capital, clear pricing power, and conservative balance sheets. These weren’t speculative growth stories, they were businesses built on predictability, category dominance, and operational discipline.

Buffett could have quietly built a public equity portfolio in India with just a few of these names. It would have required no brand licensing, no regulatory exposure, no operational complexity, just capital and conviction.

But he didn’t.

And that’s what makes the story fascinating. It wasn’t that India rejected Buffett. It was that Buffett never really showed up in the way he usually does with structure, alignment, and patience.

A missed opportunity or a calculated non-participation?

What if Warren Buffett didn’t miss India, but India simply isn’t a Buffett market?

That question may sound counterintuitive. After all, India has delivered some of the world’s best-performing stocks in the last two decades. It has all the hallmarks of a great growth story: rising consumption, underpenetrated credit, brand loyalty, and massive demographic tailwinds.

But that’s only one side of the equation.

The other is structural. India, for much of the time Buffett could have invested, didn’t offer the kind of deal architecture he prefers. Many of the country’s most reliable compounders are family-controlled, thinly traded, or expensively valued by global standards.

Even when the business fundamentals align, the governance frameworks don’t always invite passive capital with minimal involvement the way US markets do. Buffett likes to sit still while the business compounds. But in India, businesses often evolve in ways that require active engagement, local understanding, and a tolerance for regulatory unpredictability.

There’s also the matter of ownership limits.

For decades, India capped foreign direct investment in insurance and banking. Listed companies rarely dilute below promoter thresholds. This means Buffett’s preference for influence without interference is hard to replicate here. You either control nothing or too little to make it worthwhile.

Add to this the reality that Berkshire never built local investing infrastructure in India. Other global investors as Fairfax, Temasek, and SoftBank spent years cultivating local relationships, hiring India-based talent, and playing multiple roles across sectors. Berkshire never did.

So yes, Buffett missed the Indian compounding wave. But perhaps that wave wasn’t surfable with the kind of quiet, high-certainty bets he prefers. In India, even quality comes with noise. Even compounding takes chaos in stride.

The better question may not be “Why didn’t Buffett stay in India?” It might be: “Would India have allowed Buffett to be Buffett?”

And that, more than any post-mortem on Paytm or Bajaj Allianz, may explain why the most legendary name in investing never built a legacy here.

Note: This article has relied on data from the annual report and industry reports. For forecasting, we have used our assumptions.

Parth Parikh has over a decade of experience in finance and research, and he currently heads the growth and content vertical at Finsire. He has a keen interest in Indian and global stocks and holds an FRM Charter along with an MBA in Finance from Narsee Monjee Institute of Management Studies. Previously, he has held research positions at various companies.

Disclosure: The writer and his dependents do not hold the stocks discussed in this article.

The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.